Pivot Points
method = standard • timeframe = daily Overview
Pivot Points represent one of the oldest and most reliable technical indicators, born from the need of floor traders to quickly identify key price levels in fast-moving markets. The standard calculation uses just three data points from the previous trading period - high, low, and close - to generate seven price levels that act as a roadmap for the current period. The central pivot point (PP) serves as the fulcrum, with three levels of support below (S1, S2, S3) and three levels of resistance above (R1, R2, R3), creating a complete framework for understanding potential price action.
What makes Pivot Points particularly powerful is their objective, mathematical nature combined with widespread adoption. Unlike subjectively drawn trend lines or chart patterns, pivot levels are calculated identically by every trader, creating self-fulfilling prophecy effects as market participants watch the same levels. The standard floor trader method calculates PP = (H + L + C) / 3, then derives support and resistance levels using specific formulas. Alternative methods like Fibonacci pivots apply golden ratio multipliers, while DeMark pivots adjust calculations based on the previous close's relationship to the open, each offering unique perspectives on market structure.
Interpretation & Trading Signals
Market Sentiment:
- Above PP: Bullish bias, look for long opportunities
- Below PP: Bearish bias, look for short opportunities
- PP as Magnet: Price often tests central pivot multiple times
- Opening Gap: Gap above/below PP signals strong sentiment
Support/Resistance Trading:
- Bounce Trades: Enter at S1/S2 for longs, R1/R2 for shorts
- Breakout Trades: Buy breaks above R1, sell breaks below S1
- Range Trading: Trade between pivot levels in sideways markets
- Stop Placement: Use next level for protective stops
Advanced Strategies:
- Two-Day Rule: If price holds above PP for 2 days, bullish trend likely
- Central Pivot Range: Use high/low pivots for precise entries
- Multi-Timeframe: Combine daily, weekly, monthly pivots
- Confluence Zones: Strongest levels where pivots overlap
Example Usage
Code examples will be available once the Rust implementation is complete.